With Less Than 2 Months to Go, GST Becomes Synonymous with Doubt

With less than 2 months to go before GST comes in, lack of procedural clarity will only hassle the small traders.

The impending GST maelstrom is coming and millions will be caught unawares.

Just how many small businesses will be able to swim?

As the GST train rolls onward to the proposed implementation date of 1 July, millions of small Indian businesses are woefully underprepared for the transition to the new tax regime.

The GST has been rightly billed as a landmark tax reform. It heralds not just a new unifying tax but also a new way of doing business for an overwhelming majority of Indian businesses. Whilst its success in fostering growth remains to be seen, its disruptive potential has not been properly assessed by most commentators.

Also Read: Rolling Out GST by 1 July “Impractical, Undesirable”: Chidambaram

Lack of Clarity

The shift towards new regulations will not be easy in the given circumstances. With a little more than 50 days to go for the implementation date, it’s highly unusual for lack of clarity to prevail as to category of products and services which will be taxed at a different rate when GST comes in.

This prevents many businesses from ascertaining the impact of GST upon their bottom lines. The business owners have no way of knowing if their inputs are going to become dearer and how much additional cash they will need.

Small service businesses are already apprehensive of the tightening of their cash kitties on account of GST recovering taxes from them on a mercantile basis. This is in contrast to the prevailing system under service tax regulations, wherein businesses up to a certain size were allowed to pay taxes on cash basis.

Also Read: Central GST Bill: The ‘Reverse’ Charge And 3 Other Key Changes

Confusion on Filing Returns

To make matters worse, there is a lot of confusion around various procedural aspects of the new system. For example, there is no clarity on filing of returns. It is a known fact that GST is going to increase the overheads of small- to medium-sized businesses significantly. This will be even more notable where such businesses operate in more than one state. The GST talks about submission of data at three different times per state every month.

But the government has stated on a number of occasions that only one return per month per state shall be required. In the absence of an official notification to this effect, confusion reigns supreme.

There is also the small matter of the significant rejigging of current business practices and procedures that the new tax system requires. This is something most businesses do not acknowledge and as a consequence are unable to prepare for.

All in all, given the lack of clarity and preparation, the first months after GST may see panicked reactions not unlike those that followed demonetisation. Businesses, especially ones that wish to not just stay afloat but thrive, should learn to swim in these waters.

Also Read: Post-GST India Will See Improvement in ‘Ease of Doing Business’

(The writer, Pallav Pradyumn Narang is a Partner, Tax and Advisory, at Arkay and Arkay Chartered Accountants. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)